2G scam causing uncertainty for foreign firms, says USTR

The US has expressed concern over 2G spectrum scam involving alleged corruption at the government level and delays in policy formulations, saying it has caused "uncertainty" for foreign and domestic companies alike.

"Many pro-competition recommendations of the independent telecommunication's regulatory agency (TRAI) have been delayed or rejected by the Department of Telecom (DoT) without adequate explanation," says United States Trade Representative (USTR) in its trade policy document.

A major scandal surrounding the allocation of 2G spectrum erupted in November 2010, based on allegations of extensive government corruption at the Telecom Ministry and caused uncertainty for both global and local companies, it said.

The comments come in the wake of irregularities pointed out by the government auditor CAG and CBI in the recent allocation of spectrum in January 2008 by former telecom minister A Raja, who has been arrested on charges of corruption.

A number of companies, which got licences in 2008, have been named in the scandal including those who had roped in foreign companies as their partners to roll telecom networks.

Indian telecom sector is the fastest growing in the world as it is adding on average more than 15 million mobile subscribers every month. With 12 or more operators existing in each circle, tariffs in India are considered among the lowest.

The USTR, however, pointed out that India struggled for over a year to formalise its policies for the allocation of wireless spectrum to serve its rapidly expanding and lucrative wireless telecommunications industry.

Only after several postponements, it (India) could conduct long awaited 3G spectrum and broadband wireless access auctions last year amid intense competition and generated USD 23 billion, which is nearly double the government's initial expectations.

The USTR, however, attributed high 3G prices to uncertainty over 2G spectrum policy, the availability of fewer slots per circle and the limited spectrum available for auction.

This, the trade body said, could result in higher prices of 3G services for the consumers, which is contrary to the government's objective of providing affordable broadband services to rural India.